PARIS (Reuters) - Total is going ahead with a plan to invest 1 billion euros ($1.3 billion) at its Belgian refining and petrochemical complex to boost diesel-making capacity and cut costs, the head of refining at the French major said on Wednesday.
The investment will double revenues at the 340,000 barrel-per-day (bpd) plant to $500 million a year, Patrick Pouyanne, head of the refining and petrochemical branch, said in an interview.
“We are investing to prepare the future to make the platform more competitive and more profitable,” Pouyanne said, adding that the overall capacity of the refinery would not change.
Europe’s refining industry is struggling with declining margins for its aging plants, which require heavy spending on maintenance, while demand is weak as the region’s economies slump. The pressures have led to four plant closures in 2012 and another three announced so far this year.
Total’s strategy is to focus on investing in its larger, integrated petrochemical and refining plants to make them more efficient, while keeping a lid on investments at its other European refineries.
The French company cut its European refining capacity by 500,000 barrels per day between 2007 and 2011 and has said it aims to cut the region’s refining and petrochemical production even more, while it wants to grow in Asia and the Middle East.
Meanwhile, it has said it expects the merger of its refining and petrochemical operations to increase the arm’s net operating income by $650 million per year from 2015.
It has already made a similar move at its Gonfreville refinery between 2011 and 2013.
“Antwerp and Gonfreville are the flagships of our plan in Europe. What matters in that our refining operations in Europe are more profitable,” Pouyanne said.
Total plans to build at its largest refinery in Belgium a 20,000 barrel per day hydrocracking unit at a cost of 700 million euros to transform high sulphur heavy fuels into low sulphur diesel and heating oil from early 2016.
Heavy fuels are currently used in ships and barges, but with new regulations coming into force in the next few years to cut sulphur content in oil, the market for them is likely to shrink.
“Since those residues will have less of a market, they will be cheaper, and since we will transform them into low-sulphur products, they will be more expensive,” Pouyanne said.
Total will in parallel shut uncompetitive units, such as a 240,000-tonne oil-based naphtha cracker unit as well as two polyethylene-making units which have a joint production capacity of 70,000 tonnes. This will not involve job cuts, Pouyanne added.
Gasoline output will drop as a result by 10 percent to 68,000 bpd, while production of diesel will rise by 3 percent to 148,000 bpd. Heavy fuels output will fall by 30 percent.
Total also plans to save money at its Antwerp plant from the start of 2017 by replacing costly oil-based naphtha, which is used to make petrochemical products, by gas flared in the refinery.
The gas retrieved on the refining side will account for 40 percent of the hydrocarbons needed for one petrochemical cracking unit, Pouyanne said, adding this was possible only because the refining unit was near the petrochemical plant.
The French group started carrying out a similar process at its U.S. Port Arthur complex in April. It is now using shale gas-derived ethane as a feedstock for a cracking unit instead of the more expensive naphtha.
“We are now taking advantage of the shale gas revolution at our American petrochemical branch,” Pouyanne said.
Pouyanne said Total’s new Jubail refinery in Saudi Arabia had started to receive crude supplies to conduct tests but that no product had yet come out of the refinery. He reiterated that the plant is targeted to reach full production capacity at the end of 2013.
($1 = 0.7769 euros)
Reporting By Muriel Boselli; editing by Jane Baird